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Nikko AM Global Equity Fund Will Still be Available for CPFIS OA Investments. Updates after Discussions with Nikko AM.

About a month ago, I reflected upon the short-term underperformance of a Nikko Shenton fund in Dealing with Short-Term Underperformance is Tough. Reflecting on Nikko Shenton Global Opportunities Merger.

I went through my thought process and explained why I think investors through CPF OA may not have a choice but to switch to another fund now that Nikko Shenton Global Opportunities is going to be merged with Nikko’s Global Equity Fund.

Since then, Nikko AM has reached out to me and tried to understand what I was thinking and provide some clarity over what I presented.

Back then, I thought that if the fund is incorporated in a non-Singapore domicile, CPF may not readily approve the fund for CPF OA investment.

One of the main reason Nikko decide to merge the Shenton Global Opportunities into the Global Equity fund is to better market the fund to a more global investors base. To make the fund more invesable for European investors, they need the funds to be more UCITS compliant.

However, management took steps to ensure that the Global Equity fund, under the eventual structure, is compliant and can be approved for CPF OA investment.

So contrary to my belief, CPF OA investors who have invested (or are interested to invest) can invest in the Nikko AM Global Equity Fund.

I had a short chat with my colleague, our head of investments, and he reminded me that Amundi managed to get their index funds approved for CPF OA investment, and those funds were domiciled in Luxembourg. So that is a boo boo on my part.

Aside from that, Nikko also provides some background regarding the fund.

The current total expense ratio of Shenton Global Opportunities fund is about 1.25% p.a. but eventually the total expense ratio of Global Equity will be closer to 1.50% p.a. However, current Shenton Global Opportunities investors will be grandfathered into a newly created share Class F, where they will continue to enjoy 1.25% p.a. in total expense ratio.

Even before I wrote my post last month, I took a peek that the holdings of the Global Equity fund and notice the degree of concentration and similarity to the Shenton Global Opportunities fund.

Nikko shared that the investment portfolio managers of both funds are similar. The six-person investment team hailed from Standard Life’s Edinburgh team and has been in place since 2016, when Nikko brought over the whole team.

Since then, the performance of the fund has been good, and the team recently expanded into a 9-person outfit.

Shenton Global Opportunities used to be more diversified but this team has a very concentrated portfolio management philosophy. I was very appreciative Nikko spent some time explaining the philosophy of the investment team, their idea generation and investment decision making process.

You can read more about the team over here.

I am not going to share everything that was discussed. Fund managers have a way of explaining their investment ideas, how they see the markets currently and what not.

How they eventually invest and hold may be different.

Strangely, I see the performance of Nikko Shenton Global Opportunities in the past and think that the only reason they can do as well as they did is to have a long-term, coherent investment process. I cannot promise you that but that is the vibe that I was left with after the call with Nikko.

If we put the fund through the factor lens, the managers have a quality philosophy.

After their idea generation, they have a bottoms-up approach to assessing the company not based only on historical quality metrics but metrics that qualitative tells the analyst about the quality of the business in the future.

Eventually, whether the fund chooses to invest, hold or sell is put through a strict voting system that sought to prevent group think. Each investment idea need to stand up for scrutiny. Each member of the investment team will vote independently after the meeting about an investment idea. If the idea is weak, it is back to the drawing board for the analyst to look into the stock more to make a better case of the stock.

I think that is an interesting aspect of the investment decision making that I appreciate Nikko for sharing. I gain deeper insight into how the fund works.

Overall, I want to thank Nikko for the way they reach out to me and the posture they took in what may have turned out to be erroneous communication on my part.

Readers will be glad they still have a good global equity investment options available to them for their CPF OA Monies.

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Friday 5th of April 2024

Hi Kyith,

Their performance year to date had improved, and they are one of the better performing global equities fund for CPF OA investments. Yes, they have underperformed previously and I get that one of the reasons is they did not ride on the AI hype and the Magnificent Seven. Since then, I think they have added a few more AI related stocks like Nvidia and Meta which aids their performance YTD.

I think the expense ratio is quite reasonable for an actively managed global equities fund and having a stable team also helps.


Wednesday 10th of April 2024

Hi ghchua! Nice to see you around. Yeah I think they did pretty well and seem to stick to their guns but we will never fully know unless we are in their investment team.

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